As most directors of limited companies will know, there are lots of transactions between directors and their limited companies. These transactions are recorded in the ‘Director's Loan Account’.
This article deals specifically with directors using personal bank accounts for business transactions.
Paid by director personally?
In your Crunch account, you have the option to record an expense that was paid by a director personally - this means that the expense was paid from the director's personal funds. This payment could be in the form of cash, cheque, debit/credit card, or any other payment method where the money doesn’t come from the business bank account.
These expenses are classified as "director's expenses".
If you pay for a company expense personally, using your own personal bank account, the director's loan account will reflect money to you - often reflected by a positive figure - as you’ll be owed this money back from your company.
Please note: The term “paid by director personally” in your Crunch account does not mean that you have paid for the expense in person using the company bank account.
Any transactions paid directly out of the business bank account should be recorded as being “Transfer out from company account” and then selecting the relevant bank account it’s paid from.
To see a list of all expenses paid by the director, navigate to the ‘Expenses’ tab and select the ‘Expenses’ sub-tab, then on the filters drop-down menu for ‘Payment method’, select ‘Paid by director personally’.
- Find out how to withdraw the money owed to a director by the company.
- See the list of what can be claimed here.
Received by director personally?
Just as you can pay for something out of your own money, it’s also possible to receive a client payment into your own personal bank account, too.
To see a list of all income received by the director, navigate to the ‘Sales’ tab, click on ‘Client Payments’, and then on the drop-down menu for ‘Payment method’ select the filter ‘Received by director personally’.
For interest received personally, navigate to the ‘Banking’ tab, select ‘Interest Received’, and then select ‘Received by Director Personally’ under the ‘Payment Method’ filter.
If a director receives a client payment into their own bank account, the director's loan account becomes larger - reflected by a negative figure - and possibly overdrawn, which will mean owing this money back to the company.
This is because the director owes the amount received personally to the limited company, so this should always be transferred directly into the company bank account as soon as possible to avoid any complications.
See the list of what can be claimed here.
If you find that your director's loan account becomes, or is, overdrawn, we’d recommend getting in touch with us to discuss at your earliest convenience.